Storm clouds gather above €200-billion-a-year airwaves

The European Commission announced this year that it plans to introduce market mechanisms for trading spectrum, the finite natural resource that allows packaging and transmission of electronic data for mobile phone, television, radio and broadband services. Proposals to create a European spectrum agency, charged with overseeing allocation of spectrum were greeted with caution by some industry players.

Big money is involved: the market for all spectrum-based services represents €200 billion a year. Wresting control of spectrum allocation from member states could, therefore, be difficult. But the EU stands to reap significant benefits. Removing barriers to market entry created by the present situation, where blocks of frequencies are set aside for specific uses, and the promotion of increased competition in the sector could result in net gains worth €8bn-€9bn annually.

In some countries, where it is difficult for new services to obtain the spectrum needed for market entry, the proposals will be welcomed. Countries that have already set up properly functioning systems will find the Commission’s intervention hard to swallow. “It would only add bureaucracy,” fears Antti Kohtala, director of networks at the Finnish ministry of communications.

“I have the feeling that the Commission does not understand the national environments. They do not understand the business. If you regulate, you have to understand the business,” he says. “Stakeholders are happy with how we do this at the moment. In Finland, we are a very small country so we can be very fast and flexible.”

The Commission will have to resolve certain issues before the agency can be set to work. such as the definition of property rights for spectrum. Unlike material objects, spectrum does not have clear boundaries. Differentiating between different frequency bands could prove difficult, making it tricky to enforce licensing rules.

Some are jittery at the prospect of a new institution controlling such an economically important area and wonder if the Commission might be biting off more than it can chew. “We are a little bit nervous of proposals that seem to us to be a bit premature,” says Kip Meek, chairman of the European Regulators Group. “It might be an elaborate way of addressing a specific issue.”

But freeing up currently fragmented markets will make it easier for applications to be delivered at pan-European level, encouraging more innovation in the sector. Without this kind of freedom, some service providers may choose to invest outside Europe.